National Reports

Although there has been a significant improvement in income distribution since the crisis of 2002 the dissatisfaction among the population is growing. While the middle class suffers an unprecedented growth in the fiscal pressure, no correspondence is perceived in improvements of the government services or the living conditions of the most disadvantaged in spite of a strong increase in public expenditure. This inconsistency will not be solved by creating further welfare programs in order to benefit the poor or reducing the income tax to gratify the middle class. What it is urgently required is a profound change in the quality of state management.

In the context of economic stagnation, the negative social consequences of low institutional quality are evident, such as the barriers which discriminate against youth employment, especially women. While in developed countries social progress relies on high rates of youth and female employment, in Argentina the entry of young to the labour market is heavily conditioned by low education, costly and bureaucratic labor and tax regulations, and the absence strategies for promoting responsible sexual behavior.

The devaluation caused an extraordinary increase in tax collection, but the increase in public spending was higher due to the strong growth of economic subsidies. As expected, the attempts to go back to the “productive model” through devaluation are failing since the current context is very different from the one on which salaries and pensions were lowered during the 2002 crisis. The deteriorating balances of the companies providing public services due to the devaluation will require higher economic subsidies.

The federal government is decisively intervening on the teachers’ salaries negotiation, but provides a marginal and shrinking proportion of the remuneration. This contradiction generates the conflict, leading to the irrational situation where even provinces that have reached agreements with the unions are not beginning classes either. Instead of interfering in the wage negotiation, the federal government should support financially the provinces in order to reduce teacher absenteeism and droppouts, and to improve quality education.

The Argentine government will finally compensate for the nationalization of REPSOL YPF. Although the announced compensation will be of about U$S 5 billion in bonds, when the high implicit interest rates are computed the total costs rises to more than U$S 10 billion. In addition to the elevated amount, the bulk of the payments will be faced by future administrations. This is another clear testimony of opportunistic decisions made based on unprofessional criteria that compromise the welfare of future generations.